The case of an expansive yet determinable value economy


Once in a while we do find ourselves asking questions like "how high can bitcoin go?" "how low can bitcoin go?" "what price nets the max of the crypto ecosystem?" "can we grow larger than traditional economies?"

The weird thing about these questions is that people are usually thinking from the wrong angle, how? Well, for starters, when people ask questions like this, they tend to assume a couple of things:

One that the USD will remain the unit of account - whether or not this is the most likely scenario, it is still flawed on many grounds to attempt to price things in on traditional money of which technology advancements is looking to replace.

Two is that they simply assume the user base will remain the same. I genuinely feel like that is the one most of them are guilty of. They look at the pockets of the invested and think "how high can we go?" but you see, the way the world works, balance is created when things move around a bit which means we will see value in-flow and likewise value out-flow, what remains or earns the larger piece of the piece depends on many factors including: developments, attracted network of users, proportion of demand against product-type supply, value structures, models and flaws aiding exploit entries. All of this contribute to what amount of value is attracted and what is sustained, but ultimately, we are looking at:

Elasticity of demand

When we look at the fact that an economy is basically the people, what is being produced by the people, what is being consumed by the people, what is being wasted by the people, how much value is being exploited by the people, everything boils down to the people.

You want to grow in wealth? You focus on building connections with people, this is where the money comes from, because the bank is at the end of the day owned by someone so as an ecosystem, we are ultimately tasked to build an environment that will attract more people, this is effectively how growth is experienced.

Price elasticity of demand is a measurement of the change in the consumption of a product in relation to a change in its price.Investopedia

Generally, the cryptocurrency ecosystem is quite elastic, in a very weird way. When prices of assets fall, demand falls, when prices increase, demand increases, there is always a huge stretch on demand after price changes, from the concepts of this economic topic we can easily tell what the future of crypto and blockchain will look like.

  • Availability of Substitutes
  • Urgency
  • Duration of Price Change

These are the general factors that affect price elasticity and also what affects the value flow in crypto assets.

Looking at the decentralized finance ecosystem, we can see how the market is vastly filled with projects with identical product models, this makes a couple if not all of them a substitute for the other. In such an ecosystem, we are bound to experience great volatility regardless of growth as we are generally elastic, subject to substantial changes in demand.

let's say I'm looking to earn yields on my money and here I am with so many options of high paying yields to choose, here we cannot expected stability because the economic system doesn't permit such, it points us to the fact that a change in the size of a userbase may not signal stability but as an industry, we are bound to experience growth.

Urgency also affects the value flow in crypto, in fact, over the years, this has been a huge contributor to how high the bull markets see prices climb and it is likely going to remain that way because with more developments and products deployment, we will keep seeing FOMOs play in at a grand scale.

Duration of price changes literally points to how long crypto bear markets or bull markets last, to pro traders, this is their go-to metrics for drawing investment decision and given the widely adopted ideas on how crypto market growths has a determinable price action circle, we will keep operating in an elastic economy.

One where supply isn't exactly the big factor but availability of products, which we saw DeFi fall for as identical products became a norm. Urgency caused by new developments and notable duration in price movements. The bottom line is that the future of crypto is quite similar to the present if you want to look at the economic aspect of it. Prices will always increase and decrease exponentially, the userbase will grow timely with involvement urgencies filling the air and bull and bears will always be triggered by traders acting on asset price duration metrics.

The future of crypto doesn't have a max cap when it comes to how far it can rise or fall, but it has weird principles that will be a lasting piece of its economy.

Thank you and please leave a comment, your thoughts matter to me

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